Ted's Guest Blog: Part 3-Balancing Paycheck to Paycheck

This blog title should maybe be changed to Recovering Canadian Shopaholic-plus Ted. I've really enjoyed seeing his insights that I learn from day-to-day down on paper and laid out. When we got married I found there were a lot of things I didn't know I didn't know, and I am pretty sure I'm not alone. I found that to learn I really had to get my hands dirty and see how the processes we put in place work out over time. It's one thing to hear "debt is bad," but it's quite another to go through the journey of paying off debt, and enjoy the satisfaction that making better choices gives. Being a grown up, and making grown up choices are not always guaranteed to go hand in hand. For me, learning was a process, slow and sometimes painful, and not one epiphany "aha" moment. Small changes over time leads to big change.

Here's Ted!

Balancing paycheck to paycheck. Ally and I got lucky that we didn't have to think about this, but I think it made it easier to stay committed to budgeting. The goal here is to have roughly the same expendatures both at mid month and at end month, so that your disposable income is reasonably close to the same each time you get paid.

First, why is this a good thing? Imagine this scenario: At mid month pay, my credit card payment is due, so I spend very little on living. Maybe I don't even take out any "clothing and gifts" or "entertainment" because I want to pay down this high interest credit card that I got in trouble with. So here comes end month, and I don't have a credit card payment due and it's time to "pay myself". So I celebrate that I have a bit of cash and to "make up" for the fact that I tightened my belt two weeks ago. And then I go out for a meal and put it on the card "Hey, I got cash and no bills, I can afford it!". Ooops.

So how do I solve it? One way Ally and I did this was by actually knowing when during the month our expenses came out. The credit card (this is where our cable and phones go) and the car payment were mid month, while insurance and utilities are an end month expense. The mortgage comes out on the 2nd and 17th (two days after paydays). And of course there's the variable (micro) cash for each 15 day period. This leads to consistent expectations of our disposable income and no temptations to spend every second paycheck because we have no bills due right away.

It also helps to have these expenses timed to be right after pay days, so there's no need to sit on cash for two weeks to just before the next payday. Worse is taking the interest penalty and being 2 or 3 days late on a bill (which is still late as far as your credit rating is concerned) or going to a loanshark for a payday loan which costs far too much. So the takeaways are: when you sign that lease and they ask you what day of the month you want the payments to come out, give it some thought. Alternatively, give some of your payees a call and ask them to switch the due dates to something more convenient for your pay cycle. It will bring balance to the... umm... month.

Ted's Guest Blog-Part Two: Limited Spending

Part Two: Limited Spending

Ted's here to finish his thoughts on building a budget. His current focus is the struggle that I have pinpointed as my weakness with money: not spending. I think I grasp fairly well the need to spend less, or spend wisely, but the perspective of truly limited spending is still a work in progress. I am endlessly grateful for Ted's vision and structure, as he keeps me within clear and marked guidelines. Here's hubby:

One aspect of macro budgeting is to focus on the idea of limiting spending. The one thing I see most people do is that they spend as much as they have (and occasionally a bit more). And when you don't know how much you have, you get into trouble. No one ever has enough – “if only I could earn a bit more, all would be well”. Hands up if this applies to you. The flipside of the coin is to spend less.

There are tricks to limiting your spending. For instance, we give ourselves only $400 for food and gas and clothing (which I still think is a bit high). While we'll likely spend all of it, we also won't spend more. Another trick was withdrawing cash. These function to limit our access to more cash than we've decided we need. Gail recommends paying yourself first, because then what's left is all you can spend. The most important advice I can give is that getting a great price or bargain hunting is NOT mutually exclusive with limiting spending. Go ahead and get all the great prices you can, so long as at the end of the week, you haven't spent more than $200. The only person you have to convince that you don't NEED that widget on sale this week is yourself.

Another critical component of macro budgeting is the time scale. I'm talking about planning long-term. For instance, when I found out that I'd be going overseas and making more than we had expected to make during this period, the thought wasn't about increasing the monthly budget or getting lots of toys, but about what happens when the earnings are saved up over a longer period with a specific goal in mind. But what goals can we chose from? Do we redo the kitchen, go on vacation, upgrade one of our cars to a van or SUV, buy matching iPhones 5 or pay down our mortgage?

Given these choices, we decided to split our income between the mortgage and the kitchen and these are the choices which will pay off the most. The kitchen, in 2 years when we sell (and really for the two years we live with it), is the medium term investment. The mortgage pay-down alone will give us nearly 100% return on investment over the 25 years of the mortgage. The vacation will probably happen too. Happy wife…

Guest Blog By Ted: Macro Budgeting

Hubby had a few suggestions for blogging, and since his perspective/way of looking at money (and the world) is so different from my own, we both thought it would be a great idea for him to lend his own unique voice. I've really learned from him over the past few years, and I think his steering has done our family well. While our natural thoughts on money are not SIMILAR, in our marriage I have found that they can be COMPLEMENTARY. There are lots of bumps in the road to united goals, but the feeling of truly being on the same page is worth the journey.

Here's Ted:

Part 1 – Making the budget.

In dividing the budgeting responsibilities, Ally and I defined our tasks as macro - the monthly and longer term budget and the micro - the everyday living expenses on the two weeks scale. She talks about the micro budget all the time - how to stretch it or how to prioritize it. But how did we make our macro budget? Here are the steps. You can do it this evening. And so you don’t get frustrated, round to the nearest $5. Round up for expenditures, round down for earnings.

1. Find out what you pay for. Put it in a spreadsheet. These are your fixed expenses.

a. Utilities usually include water and sewer, power and/or gas. A safe guess is about $100 per month per utility. Your water and sewer combined will be half that. So the total should be between $100 and $300.

b. Mortgage or rent. How much is it? Numbers I would call normal are on the scale of $500 to roughly $1000 per month.

c. Cars? How much do you pay for a lease or finance on your car(s). $200 to $500/month? More? Do you live in you car?

d. Insurance. How much is your car and home insurance? Insured alone on my own car, I was paying $100/month. With a wife, house and two cars, we pay $250.

e. Do you have a routine debt payment? Are you sure? No student loans? What’s your minimum credit card payment?

f. Phones, internet and cable I lump in together. In the last four years, for me these have varied from $50/month to over $250. With the all inclusive HD cable package and a data plan for your iPaidTooMuch 4gs, you could be at twice that. I’m judging you.

g. Any other fixed payments?

2. Here’s how to decide on your variable expenses and reduce the variance. This is our mirco-budget that Ally withdraws in cash every payday.

a. We give ourselves $100 each in allowance; I used to spend mine on cigarettes. Ally tithes. I quit, she didn’t.

b. Spend $100/week on food,

c. $50 week on gas (or transportation) – if you have a bus pas and it costs the same every month, you can call this a fixed expense and remove it from here.

d. $50/week on clothing and gifts.

e. Some people break this down differently and add an entertainment or “other” budget. Ours is our allowance.

3. How did we get these numbers? The truth is, we guessed and adjusted for the first few months. Our number is $600 bi-weekly. (*Ally note-it's actually twice a month on payday, not bi-weekly, which equals two less withdraws/year) I think it’s lavishly extravagant. For a single, non-drinking, non smoker, this micro budget could be on the scale of $200.

4. The hard work’s done. Now add all this up (don’t forget to count your micro twice) and subtract it from your monthly income. If you’re making less than you’re spending, go see a financial advisor. If you’re in the green, you’ve got options about improving your position.

Simplicity

I've had a recurring theme of simple vs. complex coming up in my life. Most of it is showing itself in work, and I'm finding a new passion for being concise, to the point, and straightforward, without, hopefully, losing flexibility. I think that goal is completely transferrable when making future financial plans.

In a lot of cases, structure is good, and detailed planning is necessary. For friends that I know I working towards paying off debt, they've found a lot of guidance and help from Dave Ramsey Financial Peace University. His detailed, step by step process is outlined here: http://www.daveramsey.com/new/baby-steps/

Detail is good when implementing a budget, you don't want to overlook or miss things. I think where simple becomes really important is in the planned spending aspect of a budget. It's so easy to become all over the place in where you want to spend, with a list of 10 projects on the go and buying goals that will take a decade to complete. Now, I have learned over the past few years that goals are good, and planning is good, but I think sometimes we can get so caught up in "what's next" without leaving any flexibility. If I have my next $30,000 in expenditures planned, then where's the room for generosity? Where's the option of spontaneity or changed circumstances?

I just can't seem to get out of my head how complex modern life has become. All the busyness, and all the planning can make for some over structured schedules and stressed out families. If I pile 40 things into my week, and can't achieve them all (because the list was unrealistic to begin with) then I know a lot of women, not just myself, that would beat themselves up for not being able to "do it all." In direct response that pressure I've felt in myself, I've felt a calling back to simple. I have goals, I have schedules, I have guidelines, but I have the option to say, "that's too much" or even, "let's wait, and sit on it, and see." Forward momentum makes us feel like we are accomplishing, but sometimes so much is learned and gained from RESTING instead of moving.

Price Matching

I know a lot of you wise shoppers out there frequently take advantage of price matching policies, but I am new to the practice and want to highlight how AWESOMELY EASY it is to save money on groceries.

I was struck with a sudden and annoying case of insomnia, so I used the time to read up on advice from a facebook couponing queen. (Her page is Canadian Coupons and Freebies, and I HIGHLY recommend 'liking' it on facebook). She does so much of the hard work of couponing for me, reading all the flyers, and linking up sale prices in the flyers to coupons that have recently come out, allowing her fans to get some really excellent deals. My favourite deal this week took advantage of a coupon deal, as well as a price match policy. I read about this deal at 5am, and knowing I was going to save the next day somehow made the not sleeping a little more bearable.

If you are headed to Walmart for groceries, but Shoppers Drug Mart has a sale on that you want, for me at least with a one year old, it is rarely worth my time to make the second stop. That involves 2x finding parking spots, carts, unbuckling car seats, squirming toddler, and just general headaches. So you take your Shoppers flyer with you on your shop, make sure to grab the exact product (if, for example, you are buying Gain laundry detergent, the corresponding load count has to match up) and head to the cashier. Show the sale price while checking out and they will adjust to their competitors prices! One stop, multiple sales; SO COOL! There is a certain amount of time invested in looking for the products you want at other stores, and remembering to take the evidence with you. This policy though is so handy when the stars align and coupons and sales are out at the same time.

My score of the week was a bottle of Motrin, regular price at Walmart was $7.47. Shoppers had it on sale this week for $5.99. However Shoppers does not take internet coupons, which I had, and as we discussed, with the squirming toddler I don't like to make multiple stops. So I took my flyer and $5 off coupon to Walmart, and scored a bottle of 100 tablets for $.99! I did other price matches on cereal (not nearly as sweet as the Motrin, but around 40% off), as well as used a couple coupons for soy milk and Pampers.

I know that the time invested to study the flyers and carefully match products will pay for itself in deals scored and shopper satisfaction!

A list of price matching grocery stores:

Walmart, Zellers, Canadian Tire, Future Shop (I believe they also have a 10% price beating policy), London Drugs, Toys 'R Us, Sears, Save on Foods, and Real Canadian Superstore (front page items only)

Happy shopping!